What is the Intelligence Revolution IconAn Illustration of the Intelligence RevolutionWhat is the Intelligence Revolution IconAn Illustration of the Intelligence Revolution

What is the intelligence revolution?

New technologies have led to a series of industrial revolutions. Today, we believe we are entering a fourth revolution—one with growth opportunities for investors, as well as risks.

The four industrial revolutions

Technical advancements are the key drivers of change

Sources: Schwab, Klaus, The Fourth Industrial Revolution, New York, Crown Business, 2017, and Wells Fargo Investment Institute. In his book, Klaus Schwab identifies the fourth industrial revolution as being characterized by digital, physical, and biological systems. We are calling this the intelligence revolution.

Computing Power IconAn Illustration of Computing PowerComputing Power IconAn Illustration of Computing Power

The questfor power

Computing power is driving the intelligence revolution. It's typically determined by the density of integrated circuits, which has increased exponentially since the 1970s.

Future technology will bring more seamless connectivity on mobile devices and more realistic virtual reality.

Processing power timeline

More transistors = more computing power.

Sources: Our World in Data, Karl Rupp, GitHub, and Simonite, Tom, “Moore’s Law is Dead. Now What?,” MIT Technology Review, May 2016

Computing Power IconAn Illustration of Computing PowerComputing Power IconAn Illustration of Computing Power

Expanding the limits

Today's circuits are reaching the limits of density: The gap between transistors is approaching the size of a silicon atom.

New systems are being developed to overcome this limitation. This is expected to impact technologies from autonomous vehicles to augmented reality.

The future of computing power

Optical

Uses photons as a basic unit for computation. Theoretical benefits include more bandwidth and less heat.

Quantum

Uses basic units that do not have to be in definite binary states (0 or 1). Offers significantly greater computing speed.

Biological

Uses systems of biologically derived molecules to store, retrieve, and process data. Provides a link between IT and biotech.

Wide-ranging benefits

This technology is about more than cryptocurrency. Due to its speed, flexibility, and scale, it could benefit any industry requiring fast, secure transactions. For example, blockchain could reduce the cost and increase the speed of international monetary transfers.

Benefits of decentralized ledgers

A digital ledger records all transactions that take place on a peer-to-peer network

Information is encrypted and every occurrence is recorded, so it cannot be altered

The ledger is decentralized; there’s no need for a central, certifying authority

It can be used for more than the transfer of currency; records and other kinds of data can be shared

Encrypted information can be shared across multiple providers without risk of a privacy breach

Source: Wells Fargo Investment Institute, August 2018

Decentralized ledgers will become more disruptive—and beneficial to more industries.

The change will accelerate as computing power and connectivity increase.

For investors: Opportunities lie in sectors where real-time transactions, record keeping, and security are top of mind, including:

Financials

Real estate

Utilities

What do decentralized ledgers mean for your investments?

Let the strategists at Wells Fargo Investment Institute show you:

Potential investment opportunities from the growth of decentralized ledgers

Technological drivers: The technological drivers of change discussed in this report include advances in computing power, robotics, decentralized ledgers, and artificial intelligence. These drivers of change have the potential to create significant value for consumers; however, in some cases, that value may not be evenly distributed. The use of automation and robotics, for example, may create considerable opportunities for those with artificial intelligence skills while the labor of less-skilled workers may be replaced with machines. There is never any assurance that new technologies will create real value, and it is important that investors consider all aspects of technological advancement when considering potential investment opportunities, including which new technology may become commercially successful and make it possible to achieve excess investment returns. Allegations of data security breaches, infringement on intellectual property, and violation of privacy rights may engage companies in protracted legal proceedings and, even if a lawsuit is avoided, substantial costs, all of which can diminish the company’s ability to operate successfully and produce negative consequences for its investors.

Investment risks/sectors: When considering investing in new technologies within equity sectors, it is important to consider the sector‘s particular risks and the risks associated with investing in new technologies. Keep in mind sector investing can be more volatile than investments that are broadly diversified over numerous sectors of the economy. This can increase a portfolio’s vulnerability to any single economic, political, or regulatory development affecting the sector.

The information in this report was prepared by the Global Investment Strategy (GIS) division of WFII. Opinions represent GIS’ opinion as of the date of this report and are for general information purposes only and are not intended to predict or guarantee the future performance of any individual security, market sector or the markets generally. GIS does not undertake to advise you of any change in its opinions or the information contained in this report. Wells Fargo & Company affiliates may issue reports or have opinions that are inconsistent with, and reach different conclusions from, this report.

The information contained herein constitutes general information and is not directed to, designed for, or individually tailored to, any particular investor or potential investor. This report is not intended to be a client-specific suitability analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities. Do not use this report as the sole basis for investment decisions. Do not select an asset class or investment product based on performance alone. Consider all relevant information, including your existing portfolio, investment objectives, risk tolerance, liquidity needs and investment time horizon.

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